Tuesday, November 28, 2006

Calls of Note Part 4

Two firms are issuing positive comments on SiRF Tech (NASDAQ:SIRF) this am:

- Morgan Stanley is ugrading their rating to Equal Weight from Underweight as the gap between their 2007 estimates and the consensus 2007 estimates has contracted and recent data suggests the risk of SiRF experiencing a sharper than expected Q1 seasonal drop in the PND market has been reduced (relative to firm's more cautious than consensus expectation).

They have increased their Q4 adjusted EPS estimate to reflect licensing income from the u-Nav agreement (management has not provided guidance on this but the firm believes they have enough information to make the call), and 2007 EPS increase from $0.75 to $0.80 (consensus $1.04) to reflect less of a Q1 seasonal decline and a moderate amount of licensing income. While aggressive and less valuation sensitive investors may look to data points about the emerging handset opportunity as reasons to buy the stock, the firm believes an Equal-weight-V rating is suitable for most investors.

- C.E. Unterberg notes they expect Personal Navigation Devices (PNDs) to be one of the hottest selling electronic gadgets this Christmas, as the size and prices of these devices has come down further, and are crammed with even more features. Firm notes that Garmin (GRMN) expects unitshipments to rise 30% sequentially in the December quarter, while TomTom projects their unit shipments would grow between 38%-63% Q/Q this quarter, suggesting room for some upside to their and Street estimates for SiRF in Q4.

Additionally cell phone carriers are beginning to roll out services that tap into the GPS capabilities of handsets. Recent press reports indicate that in Paris, drivers will soon be able to use their GPS enabled handsets to locate nearby parking spots. In the U.S. two providers will soon be introducing a service that enables subscribers to be informed when their friends are nearby.

GPS enabled services have so far been delayed due to what is essentially a chicken and egg situation: not enough GPS enabled handsets as there have been limited GPS enabled services and vice versa. SiRF has been working with handset manufacturers for a very long time, and CEUT believes that most of the forthcoming handsets that can tap into these GPS services will use SiRF's GPS solutions. Firm continues to believe that 2007 will be a big year for SiRF's handset business, while in the near-term the increasing adoption by consumers of PNDs continues to drive the company's sales.

Notablecalls: Love the calls. Normally, I'd be all over SIRF but this time I think trading dynamics trump fundamentals.